The Ministry, through an amendment[1] to the Circular[2] dated 8 December 2020, has introduced an exemption to the prohibition[3] of the obtainment of foreign currency loans by persons residing in Turkey who do not have a foreign currency income. Another amendment dated 21 December 2020 has further extended the scope of such exemption[4].   

Exemption for PPP projects

Legal person shareholders of project companies incorporated in Turkey for the purposes of PPP projects (a “Project Company”) are henceforth allowed to obtain foreign currency loans even if they do not have any foreign currency income. One condition of such exemption was that such loans are added to the share capital of the relevant Project Company. This however did not take into consideration that such loans are generally used for funding of capex costs and hence the scope of the original amendment was then further extended by allowing such shareholders to benefit from such exemption if the foreign currency loans are used in the funding of the relevant project.

Conditions of the exemption

Various documents are required to be submitted to the lenders[5]. Accordingly, the following documents are required: (i) a copy of the Trade Registry Gazette regarding the establishment of the relevant Project Company, (ii) the originals or notarised copies of the execution pages of the PPP implementation agreement showing the date of the agreement, the parties, the subject matter and the consideration, (iii) a letter of confirmation from the relevant public institution stating again the consideration of the PPP implementation agreement, (iv) if the loan is to be added to the share capital of the relevant Project Company, such company’s decision to increase its share capital or a letter of commitment confirming that the loan will be added to its share capital; or if the loan is to be used for funding the PPP project, a letter of commitment stating that the entire loan amount has been and/or will be used within the scope of such project.

Conclusion

There are certain exemptions already in place for persons residing in Turkey who do not have a foreign currency income to obtain foreign currency loans under certain circumstance. However, shareholders and project companies involved in PPP projects are now specifically exempt from this rigid prohibition and allowed to obtain and use foreign currency loans in the funding of PPP projects.